Tesla Falls After Musk Delays Model 3 Production Goal Again

Tesla Inc. pushed back a production target for its Model 3 again and shipped fewer of the sedans than expected, setting back Elon Musk’s goal to mass-manufacture electric cars.

The electric-vehicle maker now expects to assemble 5,000 Model 3s a week by the end of June, delaying plans to reach that milestone by another three months. Tesla delivered 1,550 Model 3s in the final three months of the year, trailing analysts’ average estimate for about 2,900 units in a Bloomberg News survey.

Tesla has been blowing through more than $1 billion in cash a quarter as it’s had trouble scaling up Model 3 output despite spending heavily on the robots, assembly lines and tooling needed to produce them. The car starts at $35,000 and is pivotal to Musk’s bet that mainstream consumers will buy battery-powered vehicles in droves once they become more affordable. The company initially planned to make 5,000 units a week by the end of last year.

“Tesla has really lofty goals for automation,” Tasha Keeney, an analyst at ARK Investment Management, which holds Tesla shares, said in a phone interview. “One you have it right you can ramp really quickly, but getting to that phase is the difficult part.”

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Tesla shares fell as much as 2.7 percent after the close of regular trading to $308.80. The stock climbed 46 percent in 2017.

Including Model S sedans and Model X crossovers, Tesla delivered a total of 29,870 vehicles during the fourth quarter. The company delivered 101,312 Model S and Model X vehicles for the year, exceeding its forecast for 100,000 units. Sales of those more expensive models jumped 33 percent from 2016.

Tesla entered the final quarter of 2017 with about $3.5 billion cash in hand and projected another $1 billion in capital expenditures during the closing months of the year. In postponing production plans, the company may also be deferring spending, said Jeff Osborne, an analyst at Cowen & Co. who has the equivalent of a sell rating on the shares.

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“The big question is how much longer are people willing to wait?” Osborne said in a phone interview. “Every quarter that passes brings on more competition in terms of other vehicles being introduced.”

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Tesla reported 860 Model 3 sedans were in transit to customers at the end of December. The company said it made significant progress on speeding up manufacturing of the sedan late last month, reaching a production rate that extrapolates to more than 1,000 units per week.

Chief Financial Officer Deepak Ahuja said during an earnings call in November that cash flow will improve significantly once the company is able to ramp up Model 3 output because Tesla will collect money from customers before paying its suppliers. Cowen’s Osborne wrote in a report Tuesday that the carmaker may need to raise more capital in the first half of this year.

“Tesla is always a quarter away, and now you have to wait six months to get your report card on your investment thesis,” Osborne said by phone. “They’ve kicked the can down the road.”